Visa Is Being Sued By The DOJ

Summary

The Joseph Carlson show discusses Visa being sued by the Department of Justice for alleged monopolistic practices in debit card transactions. The show analyzes the DOJ's case, Visa's market position, and the impact on consumers and investors. Other topics include Nike's CEO change, the potential benefits of the new leadership, and the concept of 'Doom spending' among Gen Z and Millennials, where they spend on luxuries despite economic pessimism.

Takeaways

• 💼 The Department of Justice is suing Visa for allegedly being an illegal monopoly in the debit card transaction market.
• 📉 Visa's stock has been struggling, dropping 1.36% on the day of the news and 5% over the past week, with only a 4% increase year-to-date.
• 👥 Visa operates the largest debit network in the U.S., facilitating over $4 trillion in transactions annually.
• 🚫 The lawsuit claims Visa uses exclusivity agreements and volume discounts to maintain its dominance and penalize competitors.
• 🆚 Despite being a large player, Visa faces competition from companies like MasterCard, which is growing faster and gaining market share.
• 💳 Visa's debit card business is significantly larger than its credit card business, with 3.2 billion debit cards issued compared to 1.3 billion credit cards.
• 📈 MasterCard's revenue growth has outpaced Visa's, suggesting that Visa's market dominance is being challenged.
• 🛒 The lawsuit alleges that consumers are harmed as retailers pass on higher Visa fees to them, but this is disputed by some who argue that savings are often not passed on.
• 🏢 The change in CEO at Nike, with the former CEO being fired and replaced by a long-term insider, is seen as a positive move for the company.
• 🌐 The term 'Doom spending' is a new phenomenon where younger generations are spending on luxuries despite economic pessimism, which some argue is actually preventing a recession.

Q & A

Why is Visa being sued by the Department of Justice?

Visa is being sued by the Department of Justice for allegedly being an illegal Monopoly, specifically in their debit card use, where they are accused of violating Federal antitrust law.

What is the Department of Justice's argument against Visa?

The Department of Justice argues that Visa operates as a monopolist in the debit transaction markets, inflicting significant harm on consumers and businesses, and uses unlawful anti-competitive agreements to penalize merchants and banks for using competing payment networks.

How does the lawsuit against Visa affect its stock price?

Following the lawsuit announcement, Visa's stock price dropped 1.36% on the day and had previously dropped 5% over the past week, with a year-to-date increase of only 4%.

What is the significance of debit cards in Visa's business?

Debit cards are a significant part of Visa's business, with over 60% to 70% of all debit card transactions in the United States being processed through Visa's network, and approximately 3.2 billion Visa debit cards in circulation.

How does MasterCard's market position compare to Visa's?

While MasterCard is currently smaller than Visa in market cap and number of cards issued, it is not by a large margin, with 3.05 billion cards issued and growing at a faster rate than Visa, gaining market share over the past decade.

What is the impact of exclusivity agreements on merchants according to the lawsuit?

The lawsuit claims that Visa uses exclusivity agreements to maintain its monopoly power, penalizing merchants with higher fees if they route transactions through competing networks, which is alleged to be an illegal practice.

How does the Department of Justice argue that consumers are affected by Visa's practices?

The Department of Justice argues that consumers are affected because merchants and banks pass along the higher costs imposed by Visa through higher prices or reduced quality of service.

What is the potential outcome for Visa if the lawsuit is successful?

If the lawsuit is successful, Visa may be forced to allow merchants to have multiple options for transaction processing and potentially lose its exclusivity agreements, which could lead to reduced fees and more competition in the market.

Why was Nike's former CEO John Donaho fired?

John Donaho was fired due to strategic decisions that led to increased competition for Nike, such as consolidating products and reducing investment in new designs, which allowed competitors like Adidas and New Balance to gain market share.

Who is Elliot Hill, the new CEO of Nike?

Elliot Hill is a longtime insider of Nike, having started at the company in 1988 as an intern and worked his way up to become one of the top executives. His deep experience and understanding of Nike's culture and business are seen as assets for the company's future.

What is 'Doom spending' and how is it related to the current economic climate?

Doom spending refers to the trend of young people spending on luxuries like travel and designer clothing instead of saving, driven by pessimism about the economy and their future. Ironically, this behavior may be preventing a recession by continuing to stimulate consumer spending.

Outlines

00:00

💼 Visa Faces Antitrust Lawsuit

The Department of Justice, led by Merrick Garland, is suing Visa for alleged monopolistic practices in the debit card transaction market. The lawsuit claims that Visa's dominance leads to significant harm for consumers and businesses. Visa operates the largest debit network in the U.S., facilitating over 60% of all debit transactions. The company's size is used to argue its monopolistic position, despite competition from MasterCard and other credit card companies. The script discusses Visa's debit card business, which is larger than its credit card business, and compares it to MasterCard's market position.

05:02

📉 Debunking Visa's Monopoly Claims

The script challenges the Department of Justice's claims against Visa, arguing that Visa faces strong competition, particularly from MasterCard. It points out that MasterCard is growing faster than Visa and has been gaining market share over the past decade. The discussion also addresses the DOJ's allegations that Visa uses exclusivity agreements and volume discounts to maintain a monopoly, practices that are common in business. The script suggests that these practices do not necessarily harm consumers, as retailers may not pass on savings to customers even if Visa's fees were reduced.

10:02

🛒 The Impact of 'Doom Spending'

The script discusses a trend called 'Doom spending', where young people are spending on luxuries like travel and designer clothing instead of saving, due to pessimism about the economy and their future. Despite being labeled as unhealthy and fatalistic, this spending behavior is ironically preventing a recession by keeping money flowing through the economy. The term is believed to have originated on social media, particularly TikTok, and is described as a mechanism for stress relief amidst a constant barrage of negative news.

15:04

👟 Nike's Leadership Change

Nike has replaced its former CEO, John Donahoe, with Elliot Hill, a longtime insider who started at the company as an intern in 1988. The script reviews the previous CEO's strategy of consolidating products and focusing on the Nike app, which led to increased competition from brands like Adidas and New Balance. It suggests that Elliot Hill's deep experience with Nike and its culture makes him a better choice for CEO than someone with a background in cloud architecture, like the previous CEO. Despite the challenges Nike faces in a more competitive market, the script expresses optimism about Hill's leadership.

20:04

🌐 Global Economy and Consumer Behavior

The final paragraph discusses the global economy and consumer behavior, particularly focusing on the concept of 'Doom spending'. It suggests that despite the negative connotations of the term, the act of spending money on luxuries and travel by younger generations may actually be beneficial for the economy, as it stimulates economic activity and could potentially prevent a recession. The script also touches on the role of social media in shaping consumer attitudes and behaviors.

Keywords

💡Debit Card

A debit card is a plastic card that links to a consumer's bank account, allowing them to make electronic transactions directly debited from their account. In the context of the video, it is highlighted that Visa handles over 60% of all debit card transactions in the U.S., which is a key point in the Department of Justice's lawsuit against Visa for allegedly monopolizing the debit card market. This is significant as it implies Visa has significant control over the fees associated with these transactions [^1^].

💡Monopoly

A monopoly is a market condition where one company exclusively controls the supply of a particular product or service. The script discusses the Department of Justice's lawsuit against Visa on the grounds of being an illegal monopoly in the debit card transaction market. The term is used to describe Visa's alleged dominance and control over the debit card market, which potentially allows them to set fees and conditions that are unfavorable to consumers and merchants [^1^].

💡Department of Justice

The Department of Justice (DOJ) is a government agency responsible for the enforcement of laws and the administration of justice. In the video, the DOJ is suing Visa for alleged monopolistic practices. The lawsuit aims to prove that Visa's dominance in the debit card market is unlawful and harms consumers by inflating prices [^1^].

💡Merrick Garland

Merrick Garland is the Attorney General of the United States, leading the Department of Justice. As per the script, Garland is spearheading the lawsuit against Visa for its alleged monopolistic behavior in the debit card market. His role is crucial as he is the highest-ranking official in the DOJ and oversees significant legal actions such as this lawsuit [^1^].

💡Anti-Competitive Agreements

Anti-competitive agreements are business arrangements that unfairly limit competition in a market. The script mentions that Visa has allegedly used such agreements to penalize merchants and banks for using competing payment networks. This is a key point in the DOJ's case against Visa, as these practices are believed to maintain Visa's monopoly power and harm competition [^1^].

💡Market Share

Market share refers to the percentage of the market's total sales or revenue that is held by a company. The transcript discusses how MasterCard has been gaining market share in debit cards over the past decade, suggesting that Visa is not as dominant as the DOJ claims. This is an important point as it counters the monopoly allegations by showing that competitors are successfully increasing their presence in the market [^1^].

💡Visa Stock

The script mentions the performance of Visa's stock, noting that it is down 1.36% on the day and dropped 5% over the past week. This could be an indication of investor concern over the lawsuit's potential impact on the company's future profitability. Stock performance is a key metric for investors to gauge the financial health and market perception of a company [^1^].

💡Investors

Investors are individuals or entities that put money into financial assets, such as stocks, with the expectation of generating a profit. The script discusses whether Visa investors should be concerned about the lawsuit. The outcome of the lawsuit could significantly affect Visa's stock price and therefore the returns on investment for shareholders [^1^].

💡MasterCard

MasterCard is a direct competitor to Visa and is mentioned in the script as a comparison to Visa's market position. The discussion points out that MasterCard is growing faster than Visa and gaining market share, which challenges the notion that Visa is an unassailable monopoly. This comparison is important as it provides context to the competitive landscape of the debit card market [^1^].

💡Durbin Amendment

The Durbin Amendment is part of U.S. legislation that aims to limit the fees banks can charge retailers for debit card transactions. The script refers to this amendment in the context of discussing how it has impacted Visa's business practices and the potential implications of the DOJ's lawsuit. The amendment is significant as it represents regulatory efforts to control the power of major payment networks like Visa [^1^].

Highlights

Visa is being sued by the Department of Justice for being an illegal Monopoly.

The lawsuit focuses on Visa's dominance in the debit card transaction market.

Visa operates the largest debit network in the U.S., facilitating over $4 trillion in transactions annually.

Visa's debit card business is larger than its credit card business, with 3.2 billion debit cards issued.

MasterCard, though smaller, is a significant competitor to Visa with 3.05 billion cards issued.

Visa's year-over-year revenue growth is 9.7%, compared to MasterCard's 11.87%.

MasterCard has been gaining market share in debit cards, increasing from 21% in 2005 to 27% last year.

The Department of Justice claims Visa uses a 'carrot and stick' strategy to maintain monopoly power.

Visa allegedly penalizes merchants with higher fees for using competing payment networks.

The DOJ alleges that consumers bear the cost of Visa's anti-competitive practices through higher prices or reduced service quality.

Visa's exclusivity agreements and volume discounts are cited as evidence of anti-competitive behavior.

Visa's response to the lawsuit is that it is 'meritless' and they will defend themselves vigorously.

Investors may view the lawsuit as a buying opportunity, considering Visa's past performance post-litigation.

Nike has replaced its CEO, John Donahoe, with Elliot Hill, a long-term insider of the company.

Elliot Hill's appointment is seen as a positive move, given his long history and understanding of Nike's culture and business.

Gen Z and Millennials are increasingly engaging in 'Doom spending', a term describing spending on luxuries due to pessimism about the economy.

Doom spending is characterized as a mechanism for relieving stress and is considered unhealthy and fatalistic.

Transcripts

today on the Joseph Carlson show Visa is

being sued by the Department of Justice

Meritt Garland is added again targeting

the big bad monopolies and Visa is the

next one in sight they're being sued

over being an illegal Monopoly

specifically with their debit card use

the Department of Justice laid out their

argument of why they believe Visa is an

illegal Monopoly we're going to take a

look at their statement see if it has

any Merit and see if Visa investors

should be concerned after all Visa stock

is down 1.36% on the day that's after

dropping 5% over the past week and

year-to date Visa is only up 4% this

company is struggling to keep up with

the market and will'll be taking a look

going over everything with visa and

MasterCard and seeing if investors

should be concerned about this news now

of course we have some other news to get

to John donaho the former CEO of Nike

was fired he was canned and replaced

with the new CEO Elliot Hill he's a

longtime Insider of the company we'll be

going over why this is good news for

Nike and then finally we have here from

cnbc's Mak

that genz and Millennials are

increasingly Doom spending that's a

direct quote they're Doom spending we'll

be looking at what Doom spending is and

apparently why genz and Millennials are

doing it so as always we have a lot to

get into let's go ahead and start off

with the headline news visas under suit

by the Department of Justice for being

an illegal Monopoly the Department of

Justice is headed by the Attorney

General Merrick Garland and I think it'd

be beneficial to first before even

jumping into this listening to their

case Merrick Garland is the one over

this and he basically laid out the

reasons that he's suing Visa I'll go

through and I'll highlight some of what

I think are the most important points

that he brings up he starts off with a

brief summary here we alleg Visa is a

monopolist in the debit transaction

markets that is violating Federal

antitrust law and inflicting often

hidden but significant harm on American

consumers and businesses Visa operates

the largest debit Network in the United

States a debit Network facilitates the

electronic transfer of funds directly

from a consumer's bank account to the

Merchant's Bank account in a retail

transaction millions of Americans prefer

to use debit transactions which are

often the primary option for lower

income consumers without a credit card

in the United States over $4 trillion of

debit card transactions take place every

year over 60% of those transactions and

over 70% of all online online debit

transactions are routed through Visa's

electronic payment Network he's laying

the groundwork that Visa is a very large

company and that's part of being a

monopoly it's harder to be a monopoly

when you're a very small company than a

big one so making the point that Visa is

really big is accurate and in fact I

think most people realize that Visa is a

big company but most may not fully

understand how big their debit card

businesses a lot of people look at Visa

as a credit card business but they are

massive in debit cards if we look at

visa and bring up the fundamentals here

on qual trim I'll point out just one key

performance indicator these are things

that I track on different companies that

I hold even though I'm not directly

invested in Visa I do keep track of this

metric and it shows the breakdown of

total Visa cards between the debit cards

and the credit card what you'll notice

is that the dark orange hair is Visa

debit the lighter orange hair is Visa

credit Visa credit is a much smaller

portion of the cards issued the majority

of their business is through debits

that's around 60 to 70% of their

business is through debit cards and the

amount of debit cards they have is just

astounding as of the most recent quarter

it's 3.2 billion debit cards with a B if

we compare that to their credit cards

the credit cards are only 1.3 billion

still a lot of them 1.3 billion is not a

little amount but it's not anywhere

close to the Visa debit card so Visa

overall right now is more of a debit

card business than a credit crit card

business so he starts off by laying out

how big Visa is trying to paint them as

monopolist the one thing I'd point out

that he misses hair that he does not lay

out is how big Visa's competitors are we

have MasterCard here it is true that

MasterCard is currently smaller than

Visa in both market cap and cards issued

but not by a lot MasterCard still has

billions of cards issued now we just

have the total card number here but it's

3.05 billion and I would estimate that

MasterCard has a majority of theirs as

debit as well so MasterCard is a massive

competitor they're not something that

just be ignored but that's what Merrick

garland does because he's trying to make

the case that Vis is a monopoly it's

difficult to make the case that

something's a monopoly when you have a

massive competitor competing against you

we of course also have many other credit

card companies Visa Mastercard aren't

the only ones but that goes against the

point that merri arland's trying to make

he's trying to make the point that Visa

is dominant that it's the leader that

it's a monopoly that it has Limitless

pricing power and that it controls

consumers if you highlight how big the

competitors are how Fierce the

competition is in this space it

discredits his point the truth is when

you look at this from an impartial

standpoint it looks like Visa is

actually facing tough competition in

fact if we look at Visa's Revenue growth

appr proxy for their market dominance

and their pricing power it was 9.7%

year-over-year over the last trailing 12

months so we have just under 10% %

growth from Visa if we compare that

level of growth to MasterCard again

their primary competitor MasterCard is

growing faster at

11.87% so MasterCard is growing around

3% faster than Visa but Visa is being

sued for being a monopoly MasterCard

isn't if we look at different reports of

market share over time Visa is also

losing market share to MasterCard over

time MasterCard has gained market share

and debits over the past decade with 27%

share last year up from 21% in 2005 so

in the past 10 years MasterCard has

gained 6% market share of Visa's debit

card business so we see the numbers here

that MasterCard their primary competitor

is growing faster than Visa by a good

margin MasterCard is gaining market

share in debit cards which is what they

have a problem with we also have other

data we can look at MasterCard is

growing faster internationally they're

issuing cards at a faster Pace there's a

lot of reasons to believe that Visa does

have competition to face MasterCard

being the primary competitor but even as

we see that data Merck Garland Paints

the opposite picture he Paints the

picture that Visa's Moote is

impenetrable according to Visa's own

calculations it is insulated from

competition for 75 to

80% of debit transactions initiated with

a Visa branded debit

card we allege that to maintain this

Monopoly Power Visa deploys a web of

unlawful anti-competitive agreements to

penalize merchants and banks for using

competing payment networks at the same

time it coerces wouldbe Market entrance

into unlawful agreements not to compete

by threatening High fees if they do not

cooperate and promising big payoffs if

they do the result is a debit Market

where Visa has unlawfully amassed the

power to extract fees that far exceed

what it could charge in a competitive

Market merchants and Banks pass a law

those costs to Consumers either by

raising prices or reducing quality or

service and there we get to the Crux of

the complaint they're alleging that Visa

used a carrot and stick strategy to

coorse different Merchants into unlawful

agreements they would punish Merchants

by leving higher fees if they routed

some transactions to other card networks

the justice department said consumers

are losers from that Arrangement now it

is true that Visa does this they say hey

if you use just our service then we'll

give you a better rate than if you use a

lot of people's service this is called

an exclusivity agreement it's a normal

thing in the terms of business lots of

businesses have exclusivity agreements

you might have the same thing if you're

providing ingredients to a restaurant if

you're the only one providing and

supplying this product you might have an

exclusivity agreement that you get

better rates than if you have many

people supplying it this type of thing

happens all throughout businesses

worldwide so in and of itself giving a

business a better rate when they

exclusively do business with you is not

something inherently illegal many

businesses are doing this right now and

it's the reason that Visa has been able

to do this for decades now the other

part of this where they say consumers

are the losers from this Arrangement is

entirely subjective the argument from

the Department of Justice is that

retailers like Walmart and Target pass

along the cost of the Visa transaction

onto the consumer so when Visa charges

more the consumers pay more and

therefore the consumers are the loser in

the situation but that isn't necessarily

accurate in fact a lot of people that

study this stuff and do third party

research on it people that study debit

card and credit card transactions

they've looked over a lot of data and

found that even when you remove the

credit card fee the retailer does not

pass along the savings to the consumer

they pocket them for themselves so if

Walmart suddenly could get rid of Visa's

transaction fees it's not necessarily

true that they would just pass along

those savings right to the consumer a

lot of if not all of those savings would

fall to Walmart's bottom line retailers

are upset at Visa not because they have

to charge customers more but because

they have to pay visa to do business the

other thing they leave out when alleging

that consumers are the loser from this

Arrangement is that not all networks are

the same Visa has built a trustworthy

reliable insured Network to process

transactions the third-party networks

the cheaper ones that Walmart and Target

would happily send customers to may not

be as trustworthy they may not be as

reliable we had the same type of

discussion a year ago when there was a

new Durban Amendment proposed this would

allow retailers like Walmart to choose

what network your transactions are

processed on and the results would be

the same exactly cuz I'm the one paying

for that purchase I should choose where

my purchase gets run why should the

retailer decide nah let's run it on a

cheap Network that doesn't have fraud

protection that's what this bill will

allow this will absolutely harm

consumers so it may not necessarily be

in the best interest of the consumer to

make Walmart more money by transacting

through lower quality pay payment

processors but that's what could happen

if this type of thing is successful now

we've addressed this stick part where

Visa apparently punishes companies by

using exclusive agreements there's also

the carrot part the justice department

said that Visa has a practice of

offering volume discount to Merchants

that is illegal under antitrust law now

again this is something that every

business is doing all the time offering

bulk discounts for high volume customers

is standard practice in virtually every

industry especially in software and

payment proc processing they Loop this

back again to the penalizing factor

Federal Law requires that Merchants have

the ability to choose from at least two

unaffiliated debit card networks to

process transactions but Visa would

penalize Merchants who pick another

payment Network by charging higher fees

on all transactions processed so even

when they're talking about bulk

discounting they're really talking about

once again penalizing Merchants for

using other payment networks Visa likes

to have the exclusivity agreement where

companies like Costco use only visa and

they give them a much lower rate for

being exclusive with them and that is

the primary concern that the doj has now

the doj hasn't laid out specifically

what they want in terms of relief so we

don't know really what they're asking of

Visa they're just alleging they're a

monopoly at this point but if I was to

guess it would be that visa and other

credit card issuers are forced to have

multiple options for transaction

processing at Merchants and most likely

the merchant would be able to pick where

your transaction is processed if it's

processed through Visa Network or a

third party alternative that would be a

lack of choice from the customer and

would benefit the merchants now in terms

of the argument and the strength of

these arguments I think it's rather weak

from the doj I've looked at different

arguments from the Department of Justice

on many lawsuits they've had with other

companies and this one is one of the

weaker ones they're basically just

alleging that Visa gives group discounts

with exclusive agreements that has some

validity to it but that is normal stand

business practice offering discounts for

bulk and volume customers is also

something that's standard practice

outside of that Visa hasn't been boxing

out competition they haven't been buying

up companies Visa's transaction with

plaid was blocked by the doj they've

mostly been growing organically over

time so I think this is going to be an

uphill battle from the Department of

Justice and Visa thinks so as well they

said quote we are proud of the payment

networks we have built the Innovation we

advance and The Economic Opportunity we

enable

this lawsuit is meritless and we will

defend ourselves vigorously so Visa is

ready to fight this and take on the doj

now looking at this from an investment

standpoint when I look at my portfolio I

announce frequently that I invest in

Monopoly monopolistic companies that

have large dominant concentration in

very important usually Global markets so

we look at S&P Global it is a duopoly

with Moody MasterCard is somewhat

duopoly or oligopoly with Visa in this

case I actually think that MasterCard is

growing going faster taking market share

that's why I have a preference of

MasterCard over Visa into it has a very

dominant position in so many different

markets and that leads to lots of

advantages these companies are more

stable they grow organically they have

huge Network effects of people naturally

gravitating to their products there's

lots of things that go well with these

type of dominant companies but one thing

you're always going to face when you

have a portfolio like this when you're

investing in lots of dominant

monopolistic companies

is government interference government is

constantly going to be targeting these

type of companies and I've seen this

pattern over the past 5 years we see an

example of it time and time again just

recently the justice department sues

Google for monopolizing digital

advertising Technologies they're suing

Google twice for being a monopoly in two

different categories the justice

department sues Apple for monopolizing

smartphone markets that happened in

March of 2021 the justice department

already blocked Visa's proposed

acquisition of plaid this is going to be

a great acquisition for Visa this is a a

phenomenal digital property for visa to

buy but Visa ended up buying a smaller

alternative to Plaid because they

couldn't get this deal to go through and

there's many more examples in this

there's lots of governments even outside

of the us that are also targeting big

tech companies namely the EU so if you

have a portfolio full of companies that

are top te dominant world-class

companies they're going to run into

regulatory issues over time that is the

natural consequence of being a dominant

winner

whether Justified or not and I can say

the same thing about the story fund the

companies in this portfolio are every

bit as dominant as in the passive income

portfolio so far some of them have

avoided a lot of legal action but some

haven't Amazon has been under threat of

lawsuit and sued so many times for being

a monopoly and it's never going to end

for this company as long as they're

dominant as they are but the company

will continue winning anyways Netflix is

one that I think has avoided most

lawsuits it hasn't been one that's been

targeted but I think with the continued

dominance of Netflix and when investors

the market and government officials from

large economies realize that Netflix is

in fact a dominant company that has huge

concentrated market share they're going

to be targeted as a monopoly as well I

think it's only a matter of time I can't

perfectly predict the future with any of

these companies but if we use history as

a guide in most cases having these

companies targeted as a monopoly ends up

with these companies becoming stronger

over time Visa itself is an example of

this the first Durban amendment was

passed in 2011 if we look back close to

that time period Visa was trading for

below $50 per share the stock price is

up 400% while it's paid dividends the

entire time up to

$270 and this was after a groundbreaking

Anti-Trust lawsuit was successfully

launched against Visa the stock has

still crushed the market over that time

period so I consider events like this

with scary things happening to an

otherwise great company compan as

typically buying opportunities and I

think most Visa investors will do really

well over time given its current

valuation and price point I'm not going

to be buying into Visa because I already

own a lot of MasterCard but I'm going to

continue holding my Mastercard now

moving on we have some good news for

Nike Nike fired their old CEO John donow

and they replaced him with someone named

Elliot hill now Elliot Hill is not a

known entity he's someone that has

worked at Nike for a long period of time

we'll learn about him in just a minute

but I want to highlight just a in which

I covered this in a previous episode but

I think it would be good to summarize

really quick the problems that John

donel caused with Nike basically what he

did was he Consolidated a lot of Nike's

Products off of different retail shelf

space and off of different online

Outlets like Amazon and

and of course the consequence of that

was having other top competitors like

new balance and Adidas quickly fill in

that shelf space Adidas and New Balance

found that they had a lot more

distribution which caused them to gain

market share then Nike also decided to

make their business more efficient

higher margins by lowering the amount of

investment into new shoes and new

designs instead of just creating new

designs for runners they created a lot

of new colors for existing product lines

and this allowed a host of all new

different shoe companies to start spons

in ones like Hoka on brand ones like

Brooks all these different brands

started popping up out of nowhere and

they got popular people found out about

these shoes they fallen in love with

these shoes and now Nike has a host of

competitors that didn't exist just four

years ago so in many ways we can

directly attribute the increasing

competition to Nike as a consequence for

them concentrating everything on the app

and that's why it was overall looking

back in hindsight not a great decision

to put everything on the app and here we

have Nike now investors realize the

mistake they've made the executive team

has as well and they need a change of

leadership so they can John donow and

they get a brand new Nike CEO now I

didn't know anything about this guy

Elliot Hill and most people didn't as

well because he's not a known name he's

not some hot shot CEO moving from

company to company he's not someone that

came from a firm like McKenzie that was

plugged into the company Elliot Hill

started working at this Aker Giant in

1988 as an intern right when I read this

first sentence I already like him better

he's already a better CEO in my opinion

than the existing or previous Nik CEO

the fact that he started working at the

company in

1988 as an intern I was born in

1989 just to give you an idea of how

long ago that was he has been working at

this company for longer than I've been

alive so when you talk about CEOs and

their ability to to see the company

overall the culture the direction they

should go I think it's always a better

idea to have people that have been there

a long time period that really know the

company that they've lived the company

they've experienced it it's basically

all they know is that company from what

I see that is most often the best people

to have running the company and I see

the same thing with Costco the Costco

CEO someone that worked as a forklift

operator he worked as a starting point

in the company and Rose through the

ranks and this guy Elliot Hill did the

same thing he took on calls from

customers he moved boxes in warehouses

over more than three decades he claimed

to be one of the top Executives so in

2020 Nike had to decide who to make

their CEO they had option one who was

Elliot Hill who had worked with the

company for 35 years risen through the

ranks over time then they had option two

John donow who was someone that had

experience with Cloud architecture but

he was more of a Consulting type of

person coming from ban and Company which

is similar to a McKenzie type of

Personality they wanted to make the app

big and so they chose someone that had

experience in app architecture but of

course this was the wrong decision they

needed someone that had experience

running Nikey not someone that had

experience running Cloud architecture

Nike has a lot of Engineers that they

can refer to to figure out the

technicalities having someone that has

the experience of the culture and the

business was far more important so once

they realized the error in this decision

they fired John and they brought back

Elliot Hill so he is now back to try to

revive Nike and get it back on track now

they know hair accurately that he faces

steep challenges the industry is

increasingly fragmented Rivals like Hoka

and an are taking market share from

Nike's core running category and its

lifestyle offering another hurdle will

be managing key franchises like Air

Jordans and dunk which Nike oversold in

recent years Nike is cutting back on new

releases under those models in an effort

to Engine air scarcity Executives warned

in June that the move would likely hurt

the company's sales growth so this is a

great thing to have him as a CEO I think

he's going to do a better job and make

decisions that will help Nike in the

long term of the company but he now does

face a far more uphill battle these

other brands like an and Hoka already

exist people have already fallen in love

with them and it's true that Nike is

facing a far more competitive space so

even though I think this is a great job

from the Nike executive team to bring

back Elliot Hill to the company I think

he'll do a better job I still think that

Nike is going to face a lot of

challenges for that reason I'm not

buying the stock right now but I wish it

well now moving on we get to this

headline here gen Z and Millennials are

increasingly Doom spending here's what

it is and how to stop it when I read

headlines like this I just wonder where

the term comes from who's pioneering

terms like Doom spending I've never

heard of this in my life and I have just

a hunch a hunch that this is from Tik

Tok I feel like whenever there's a new

term that's it's out there it's a little

crazy it comes from Tik Tok but

apparently some young people are

splashing out on luxuries like travel

and designer clothing instead of saving

and a trend that's being carried

characteriz as doom spanding on social

media social media I I think it's I

think it's Tik Tock in this definition

Doom spanding is when a person

mindlessly shops to self soothe because

they feel pessimistic about the economy

and their future according to psychology

today so apparently this is when you

feel so pessimistic about the economy

and about the future you're just you're

just going out and spending money to

sooe yourself a mechanism for relieving

the stress making so you a little bit uh

happier in the moment according to a

senior lecturer in finance at King's

business school the practice is both

quote unhealthy and

fatalistic now it may be unhealthy but

the ironic thing here is that that

people Doom spending and going on

vacation and spending their money is

ironically what's causing us not to go

in a recession so so people are are

mindlessly spending money feeling

pessimistic about the economy because

they might fear an upcoming recession

but them mindlessly spending money is

what's causing us to not go in a

recession they say that this is also

happening because people are chronically

online and feel like they're constantly

receiving bad news it makes them feel

like Armageddon to me after reading this

it seems like Doom spending is just

another way for people to complain they

have a lot of money they're spending it

going on vacations and shopping and

we're still unhappy about it but there

you have it apparently the global

economy right now is being held up by

Doom spending that's all for this

episode see you in the next one